Most of you have thought about donating to charities, improving your society, and making a difference by giving to a cause you support - and that is truly admirable. The government offers its entire support to charitable services in light of this noble deed. The good thing is, you are entitled to a tax deduction for gifts and donations made to charitable organisations under Sec 80G of Income Tax Act.
Here are some things to keep in mind.
What is Section 80G?
As per the Income Tax Act, Section 80G, donations made to specific relief funds and charity organisations can be claimed as a deduction from income tax.
However, Sec 80G of income tax act does not permit deductions for all donations.
Deductions are allowed under the Income Tax Act when calculating each assessee\'s overall taxable income. One such deduction is allowed under Income Tax Act Section 80G for gifts made to trusts or charitable organisations. Donations are also accepted for political parties, academic institutions, and electoral trusts.
Who Can Fall Under 80G Exemption List?
You can claim a tax deduction or exemption under Section 80G as tax benefits if you are entitled to pay tax. It makes no difference if you, the taxpayer, are a group, a corporation, or an individual. You must, however, have an Indian passport and either be an Indian resident or an NRI to be a part of 80G exemption list. In all situations, in order to be eligible for an exemption, you must have taxable income in India.
Mode of Payments
Under Sec 80G of income tax act, deductions are not allowed for gifts of in-kind goods like food, materials, clothing, or medications. Only contributions made in the form of checks, drafts, or cash are eligible for tax benefits and exemption.
- Amendment to Section 80G: Starting with the 2017–18 fiscal year, deductions for cash gifts beyond Rs 2,000 will no longer be permitted. To qualify under Section 80G, donations over Rs 2,000 must be made in a way other than cash. The previous cap on cash donations was Rs 10,000.
- Eligible Amount: The various donations under Section 80G are qualified for a deduction of up to 50% or 100% with or without restrictions, as stated in Section 80G.
Eligibility for the 80G Certificate
Since there are restrictions on which nonprofit organisations can receive 80G certification, not all NGOs or trusts qualify. However, here is a concise summary of the requirements that organisations must satisfy in order to receive an 80G certification:
- Separation of business and charity: In order to get an 80G exemption certificate, your organisation must be separated if it engages in any business activities outside of its charitable component. As there are separate actions stated for donations under section 80G.
- No misusing: The contributions made so far to the cause should not be utilised in any other way or on any other account, not even by the organisation itself. Therefore, in order to demonstrate that they have not misappropriated any amount of donation, all such organisations must uphold stringent accounting procedures.
- No religious activity: Any NGO or trust that promotes a particular caste or creed or participates in religious preaching is ineligible for 80G certification.
- Accounting properly: Organisations must keep correct and current accounting records and books of financial transactions as proof before asking for an 80G exemption.
- Appropriate registration: The organisation must be properly registered under Section 25 of the Companies Act of 1956 or the Societies Registration Act of 1860.
Tax Benefits for the Organisations
The tax benefits certification enables contributors to lower their tax obligations on the amount donated by 10% to 50%. The 80 G certification, however, offers benefits beyond just enabling contributors to claim a tax deduction for their contributions. Additionally, it offers businesses several tax advantages. The institution is eligible for a 10% exemption on its gross income from contributions and donations.
Additionally, the Income Tax Department can accept or reject such requests if the nonprofit organisation is disqualified or its operations lack quality and legitimacy. While encouraging people to give money to nonprofit organisations is the main function of 80G certification, it can benefit organisations in several other ways as well.
As you start along the charity route, you need to keep up with the work of reputable non-governmental organisations. For instance, you can take the path of donation under section 80G, and contribute to the child rights NGO Save the Children, India\'s most well-known and reputable children\'s charity. Through pan-Indian activities and consistent initiatives, it gives children access to essential services like education, healthcare, social protection programmes, and life-saving aid during humanitarian disasters.